WAYNE, Pa., Nov. 14 /PRNewswire-FirstCall/ -- Escalon Medical Corp.
(Nasdaq: ESMC) today announced results for its fiscal first quarter ended
September 30, 2007.
    For the first quarter of fiscal 2008, the Company reported net revenue
of $6,893,271, a 4% decrease from the $7,168,160, reported in the prior
year period. This decrease was primarily due to decreased sales at the
Company's Sonomed and Vascular business units, which decreased 3% and 2%,
respectively, compared with the same period last fiscal year. The decrease
was also attributable to decreased royalties received from the IntraLase
License Agreement as a result of the Company's previously announced
settlement agreement.
    These decreases were offset by strong sales in the Company's Drew,
Medical/Trek and Escalon Digital Solutions (EMI) business units, which
increased approximately 9%, 5% and 33%, respectively, compared with the
same period last fiscal year. Product revenue increased approximately
$289,000, or 4%, to $6,833,000 during the three-month period ended
September 30, 2007 compared with the three-month period ended September 30,
2006.
    For the first quarter of fiscal 2008, the Company reported a net loss
of ($828,791), or ($0.13) per diluted share, compared with a net loss of
($714,117), or ($0.11) per diluted share, in the first quarter of fiscal
2007. Cost of goods sold as a percentage of product revenue increased to
approximately 57% of revenues during the three-month period ended September
30, 2007, as compared with approximately 55% of product revenue for the
same period last fiscal year. Additionally, operating expenses decreased
approximately 17% during the three-month period ended September 30, 2007,
compared with the same period in the prior fiscal year. This was
attributable to increased operating efficiencies at the Drew business, as
well as higher than usual legal costs incurred during the prior year period
that were related to the then ongoing IntraLase litigation.
    Recap of Fiscal First Quarter 2008
    Richard J. DePiano, Chairman and Chief Executive Officer, commented,
"During the fiscal first quarter of 2008, we began to realize the full
effect of our initiatives to streamline operations implemented during
September 2006 with respect to the Drew business. We are very pleased with
the performance at Drew and continue to look for additional opportunities
to reduce our operating costs and expand operating margins throughout the
entire organization."
    Mr. DePiano added, "Turning to our operating performance for the first
quarter of fiscal 2008, product revenue was $6,833,000 an increase of
approximately $289,000, or 4%, during the three-month period ended
September 30, 2007 compared with the same period last fiscal year. In the
Drew business unit, product revenue was $3,036,000 an increase of
approximately $250,000, or 9%, compared with the same period last fiscal
year. The increase is primarily due to the introduction of the new FDA
Trilogy instrument, international sales of the new D3 instrument and
increased reagent revenues generated from Drew's United Kingdom facility.
We anticipate that Drew's new D3 instrument will be ready for sale in the
United States in the second quarter of fiscal 2008."
    "At our Sonomed business unit, product revenue was $2,233,000 a
decrease of approximately $60,000, or 3%, compared with last the fiscal
year. The primary reason for this was a large increase in lower margin
international sales combined with an overall decrease in unit sales in the
higher margin domestic market on the VuMax II. Product revenue decreased
$13,000, or 2%, to $804,000 from $817,000 in the Vascular business unit
compared with the same period last fiscal year, primarily from a decrease
in direct sales to end users by our domestic sales team. Overall sales have
remained stable and we anticipate introducing a visual ultrasound vascular
access product at Vascular during the second half of fiscal 2008."
    "In our Medical/Trek business unit, product revenue increased $18,000,
or 5%, to $383,000 as compared with last year, which is attributable to an
increase in the sale of Medical/Trek's mature product line of Ispan
Intraocular gases and fiber optic light sources. Additionally, product
revenue increased $94,000, or 33% in our EMI business unit, when compared
with last year. This increase is due to the sale of digital imaging
systems. The EMI division is realizing the benefits of obtaining
proprietary products and the successful expansion of its sales effort and
product offerings."
    Mr. DePiano concluded, "We are pleased with the sales progress at our
Drew, Medical/Trek and EMI units, and anticipate that Drew will submit its
new DS-360 Analyzer for FDA approval in the second half of fiscal 2008. Our
profitability in the Vascular unit continues to be strong, and we are
looking forward to introducing our new visual ultrasound product in this
business during the second half of fiscal 2008. We continue to strengthen
our business platform and expect to continue this momentum throughout the
remainder of fiscal 2008."
    Non-GAAP Measures
    To supplement the Company's consolidated financial statements presented
in accordance with GAAP, the Company has begun providing certain non-GAAP
measures of financial performance. These non-GAAP measures include non-GAAP
net loss and non-GAAP loss per fully diluted share.
    Specifically, the Company believes the non-GAAP measures provide useful
information to both management and investors by isolating certain expenses,
gains and losses that may not be indicative of its core operating results
and business outlook. In addition, the Company believes non-GAAP measures
that exclude stock-based compensation expense enhance the comparability of
results against prior periods.
    The Company's reference to these non-GAAP measures should be considered
in addition to results prepared under current accounting standards, but are
not a substitute for, nor superior to, GAAP results. These non-GAAP
measures are provided to enhance investors overall understanding of the
Company's current financial performance and provide further information for
comparative purposes due to depreciation and amortization and the adoption
of the new accounting standard FAS 123R.
    The non-GAAP measures and the reconciliation to the most directly
comparable GAAP measure of all non-GAAP measures are as follows:
                                    Three Months Ended September 30,
                                          2007            2006

    Net loss                           $(828,791)      $(714,117)
    Non-GAAP adjustments:
    Stock-based compensation             $12,934         $   -
    Depreciation and amortization       $145,083        $135,279

    Total adjustments                   $158,017        $135,279

    Non-GAAP adjusted loss             $(670,774)      $(578,838)

    Shares used in computing
     basic and fully diluted
     earnings per share                6,388,086       6,344,657

    Non-GAAP adjusted loss per fully
     diluted share                        $(0.11)         $(0.09)
    Founded in 1987, Escalon develops markets and distributes ophthalmic
diagnostic and surgical products as well as vascular access devices. Drew,
which operates as a separate business unit, provides instrumentation and
consumables for the diagnosis and monitoring of medical disorders in the
areas of diabetes, cardiovascular diseases and hematology, as well as
veterinary hematology and blood chemistry. The Company seeks to utilize
strategic partnerships to help finance its development programs and is also
seeking acquisitions to further diversify its product line to achieve
critical mass in sales and take better advantage of Escalon's distribution
capabilities. Escalon has headquarters in Wayne, Pennsylvania and
manufacturing operations in Long Island, New York, New Berlin, Wisconsin,
Dallas, Texas, Oxford, Connecticut and Barrow-in-Furness, U.K.
    Note: This press release contains statements that are considered
forward- looking under the Private Securities Litigation Reform Act of
1995, including statements about the Company's future prospects. They are
based on the Company's current expectations and are subject to a number of
uncertainties and risks, and actual results may differ materially. The
uncertainties and risks include whether the Company is able to implement
its growth and marketing strategies, improve upon the operations of the
Company's business units, including the integration of Drew's and MRP's
operations and any acquisitions it may undertake, if any, of which there
can be no assurance, implement cost reductions, generate cash and identify,
finance and enter into business relationships and acquisitions,
uncertainties and risks related to new product development,
commercialization, manufacturing and market acceptance of new products,
marketing acceptance of existing products in new markets, the continuity of
royalty revenue, litigation and non-recurring expenses, research and
development activities, including failure to demonstrate clinical efficacy,
delays by regulatory authorities, scientific and technical advances by
Escalon or third parties, introduction of competitive products, third party
reimbursement and physician training as well as general economic
conditions. Further information about these and other relevant risks and
uncertainties may be found in the Company's report on Form 10- K, and its
other filings with the Securities and Exchange Commission, all of which are
available from the Commission as well as other sources.
                    ESCALON MEDICAL CORP. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                 (Unaudited)

                                         Three Months Ended September 30,
                                             2007               2006

    Net revenues:
    Product revenue                       $6,833,350         $6,543,586
    Other revenue                            $59,921            624,574
    Revenues, net                          6,893,271          7,168,160

    Costs and expenses:
     Cost of goods sold                   $3,922,586          3,630,380
     Research and development               $923,361            713,605
     Marketing, general and
      administrative                      $2,939,908          3,555,900
        Total costs and expenses           7,785,855          7,899,885
    Loss from operations                    (892,584)          (731,725)

    Other (expense) and income:
     Equity in Ocular Telehealth
      Management, LLC                        (34,111)           (18,543)
     Interest income                         101,697             45,436
     Interest expense                         (3,793)            (9,285)
       Total other income                     63,793             17,608
    Net (loss) before taxes                 (828,791)          (714,117)
    Provision for income taxes                     0                  0
    Net (loss)                             $(828,791)         $(714,117)


    Basic net (loss) per share                $(0.13)            $(0.11)

    Diluted net (loss) per share              $(0.13)            $(0.11)

    Weighted average shares - basic        6,388,086          6,344,657

    Weighted average shares - diluted      6,388,086          6,344,657



    SELECTED BALANCE SHEET DATA:
                                               September 30,        June 30,
                                                    2007              2007

    Cash, cash equivalents and Investments       $7,628,173        $8,879,462
    Total current assets                        $19,890,626       $21,763,012
    Total assets                                $43,259,117       $45,017,213
    Current liabilities                          $3,570,805        $4,524,607
    Long-term debt                                  $   -             $   -
    Total shareholders' equity                  $38,601,312       $39,405,606

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